Why do you need a business plan?
A business plan helps you to:
- clarify your business idea
- spot potential problems
- set out your goals
- raise finance
- measure your progress
While banks and investors will certainly want to see a business plan (and the content will influence their decision to lend or invest in the business) the main purpose of the plan is to help you, the founder, and the business itself. A well-written plan will include the assumptions and estimates on which the business idea is based – assumptions such as demand, pricing and the level of competition.
Once the business has been trading for some time, these assumptions can be revisited. Perhaps customer demand is lower than expected, or competitors are undercutting you. The quicker you can pivot the business to take account of these factors, the more likely it is that a viable alternative can be found. That is why measuring your progress against initial expectations is important.
What does a business plan look like?
A business plan is a document that describes your business now and in the future. There are many versions available online, the template from Start Up Loans is well-established and is linked at the foot of the page. There is no right or wrong way to write a business plan, you should pick a format that works best for you.
A typical plan could cover:
- business strategy
- technology development roadmap (if relevant)
- market analysis
- sales and marketing
- operations and resources
- staff and management team
- financial forecasts.
The plan should have projections 3-5 years ahead but need only go into detail for 12 months. Writing detailed projections years into the future risks giving an illusion of accuracy, with limited practical value.
Refining your plan
Depending on your knowledge of the market, the business plan may reveal the need for more research. For example, are you sure that others have not had the same idea and might be offering it to the market? How price-sensitive is this market – what would happen if a competitor were to undercut you?
Sharing the plan with others you can trust is essential, to get a variety of perspectives. This is where a supportive peer network is invaluable, to provide challenge to your assumptions and ideas. Much better to realise at the planning stage that your projections are unrealistic than to make that discovery when your business and livelihood depends on it.